Technology Still Rules but Watch Financials, Industrials

The technology sector’s secular leadership trend remains unbroken (see top panel of the charts below), but that don’t ignore the potential elsewhere. As Tom Lee has noted this week, more cyclical sectors, such as the S&P financials and industrials (see the center and bottom panels) are becoming more interesting for investors. It will pay to watch them. Here’s why: Though those two sectors have been in relative performance downtrends since early 2018, they are very near to reversing those downtrends.

Moreover, given my bullish technical outlook for equities overall through 2019, I expect to see performance improve across more and more cyclical sectors, such as financials and industrials. Keep an eye on the following: a move above the downtrends indicated by the blue arrows on the charts below would be one technical development to signal an improvement in these cyclical sectors. Since technology is already up a lot, the financials and industrials could prove rewarding too. Stay tuned.

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